Friday, 3 August 2007

Poor Gordon, poor us

Gordon Brown has some very difficult decisions to make over the coming weeks. He really wants to get a mandate from the electorate but he is a very very cautious man; he is aware of the historical precedents when delaying holding an election in the UK but he really fears losing. Adding to his problems is the EU Constitution Treaty becoming a newsworthy story and the increasing calls for a referendum. If he calls an election soon enough then maybe he can have the election before the referendum calls become even louder, or perhaps he can do a Tony and promise a referendum to reduce the Conservative vote. Another problem is that the economy really does look as though it is about to go "belly up". First the housing market is poised to crash as repossessions rise and the warnings of more interest rate rises and calls to make sure you can afford the repayments before taking on a mortgage increase in stridency. Second, the sub-prime lending market in the USA is failing and the UK market seems doomed to follow. Third the world debt markets are tightening, $60bn of deals have been pulled in the last month from the corporate credit markets and $87bn has been wiped off the value of 10 of the world's largest corporate lending banks since January. More worryingly it is reported that banks in both the USA and Europe have been left with $500bn in leveraged loans that have been agreed but they cannot syndicate out. If this all unravels then the fallout could be very very messy for all of us in the UK. Fourth, the fall of the US economy is very close and when it happens Gordon Brown's decision to put so much of the UK reserves into US Treasuries over the last 12 months - UK investments have almost trebled from $55bn to $167bn - whilst other European countries have not followed suit and the Chinese look set to dump dollars. Looked at another way Gordon has "invested" $110bn in the US over the last year whilst the exchange rate has moved so far against the dollar, that could be around $2bn that he has lost us over 2007 so far. That can be added to the lost he made when he sold off much of the UK gold reserves in such an inept way.

I really think this could be the big one, the economy looks in a bad way and if Gordon's PFI fiddles finally have to be reported on the UK balance sheet due to changes in International Accounting Standards then the truth about "Prudence" will come out.

I said in 1992 that that was the election that the Conservative party didn't think it would win and secretly hoped it wouldn't as the ERM disaster beckoned. This time it might be best, if Gordon does call an election, for the Conservatives not to win it. A Conservative election victory followed by the economy collapsing would be blamed by the MSM on the incoming Conservative Government, unless the incoming administration really go to town over the fiddles they have discovered in the Treasury files and there will be a lot to discover. Maybe it would be better for the country for Labour under Gordon Brown to win with a reduced majority and for him to take all of the flack when the economy dives. The recovery will be even more painful than it was in the 1980's when a Conservative Government last had to pull the UK out of a Labour economic mess but at least everyone would know who to blame - Gordon "Prudence" Brown.

So as you enjoy the warm weather this weekend, spare a thought for Gordon in Dorset. He has a lot to think about, I hope he's packed a teddy to cuddle for comfort.

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